Produced via a cooperative agreement sponsored by The United States Department of Agriculture

Abstract

As part of a cooperative agreement with the United States Department of Agriculture (USDA), the George Washington University Regulatory Studies Center produced a five-chapter report on regulatory differences between the United States (U.S.) and the European Union (EU) and their effects on agricultural productivity. Those chapters are published here as a working paper series with five parts. This chapter provides an overview of key statistical comparisons between the agricultural sectors of the U.S. and the EU. Its purpose is to highlight key economic indicators, describe the role that agriculture plays in each economy, and highlight differences in each jurisdiction’s respective factor endowments and trade patterns. In addition, this chapter updates key statistics contained within the USDA Economic Research Service’s (ERS) 2004 report: U.S. – EU Food and Agricultural Comparison.[1]

Introduction

The United States is a Federal Republic consisting of 50 States and the District of Columbia. Under the U.S. Constitution, governmental powers are shared between federal and state governments. Powers related to national security, monetary policy, foreign affairs, and the regulation of commerce are vested in the federal government; any powers not delegated to the federal government or prohibited to the states, are reserved to the states or to the people.[2] Thus the federal and state governments share responsibilities affecting agriculture. At the national level, the USDA is charged with implementing national agricultural policies, and state governments have their own departments of agriculture. The key agricultural policies of the federal government are established in a Farm Bill passed by the U.S. Congress every five years or so, which authorizes services and programs regarding farm support, rural development, trade and foreign agriculture, research, nutrition, and conservation, among others.

The EU’s scope has expanded since its creation as the European Economic Community (EEC) in 1957. The initial six member states—Belgium, Germany, France, Italy, Luxembourg, and the Netherlands—came together to foster economic cooperation. Gradually, free movement of goods and services and adoption of a single currency by most member states strengthened the EU. The Union has increased its membership from six member states in 1958 to 28 member states in 2015 (EU-28) through six phases of enlargement. The largest expansion was in 2004 when ten countries—Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia, and Slovenia—joined the union, expanding EU-15 to EU-25. Croatia is the latest country to be included in the EU in 2013. The pending departure of the UK from the EU, as called for in the 2016 “Brexit” referendum, would be the first time any country separated from the union.

The initial six member-states adopted a Common Agriculture Policy (CAP) in 1962, which focused on market stabilization, productivity improvement and price support but subsequently included environmental measures during the late 1980s which became compulsory for member states as of 1992.[3] The European Commission’s Directorate-General for Agriculture and Rural Development is responsible for implementation of all aspects of agriculture policies such as farm support, market measures, rural development policy, financial and legal matters, and agricultural trade.

Agriculture is an important sector, economically and politically, in both the U.S. and the EU. The share of agriculture as a percentage of the total economy is similar in both the regions. As of 2016 agriculture contributed approximately 1.6 percent and 1.1 percent to the EU and U.S. Gross Domestic Product (GDP), respectively.[4] It is also worth noting that farm outputs are essential inputs for several value-added industries such as food service, textiles, leather products, and forestry and fishing. In the U.S., agriculture and agricultural related industries, combined, contributed $835 billion, or 4.8 percent, to U.S. GDP[5] compared to 1.5 percent in the EU.[6]

Agriculture in the U.S. also produces significant quantities of renewable fuels; here ethanol is primarily derived from corn, while biodiesel is primarily produced from soy.[7] According to the U.S. Energy Information Administration (EIA), “approximately 40 percent of total domestic corn crops [were] diverted from food and animal feed to ethanol production” in 2012—a sizeable increase from just 14 percent in 2005.[8] However, the decline in the use of corn for feed is partly offset by the use of ethanol byproducts, such as distiller’s dried grains with solubles (DDGS), which are used for feed and may offset a portion of the decline caused by diversion.[9]

In the EU ethanol is primarily derived from grains and sugar beet derivatives, but there are regional differences. Northwestern Europe relies on wheat; central Europe on corn; and France, Germany, and Belgium use sugar beets for the production of bioethanol.[10] Earlier, the EU imported corn from the U.S. but many member states now prefer to source non-GM (not genetically modified) corn from Ukraine because “producers…prefer to market their distillers dried grains (DDG) as non-GM to the domestic feed market”.[11]

The significance of agriculture in the EU is evident in the comprehensive CAP that provides price and income support to farmers and addresses environmental sustainability by promoting environmentally friendly farming practices. Agriculture as a policy area falls under the jurisdiction of the European Commission, with 38 percent of the EU budget allocated to the sector in 2015.[12] The 2004 and 2007 EU enlargements caused shifts within its agricultural sector – the inclusion of new countries increased the number of farmers and agricultural land area, and also diversified its agricultural products and practices.

[1] Note that the report below generally uses the latest available data from sources such as USDA ERS and Eurostat (e.g. 2014 or 2015). However, data from earlier years are sometimes used to preserve the validity of comparisons between the U.S. and EU for which more recent data are not available from the same source.There is variation in the timing of data availability depending on the source organization. While USDA ERS and Eurostat provide very recent data, internationally comparable data available from FAO is only available up to 2013.